Crude oil markets reacted to emerging diplomatic developments over the weekend, with prices settling at their lowest levels in six weeks. This shift followed reports that the United States and Iran might agree to extend a ceasefire by 60 days, raising hopes for a reduction in regional tensions and the reopening of the Strait of Hormuz, a vital oil transit route.
The US benchmark, West Texas Intermediate for July delivery, dropped 1.73 percent to close at $87.36 per barrel. Meanwhile, the international benchmark Brent crude for August delivery fell 1.7 percent, finishing the week at $91.12. These declines reflect a decreasing risk premium as traders anticipate improved stability in the Persian Gulf.
Despite these encouraging signs, uncertainty remains. The Iranian Foreign Ministry denied that a final agreement had been reached, indicating ongoing communication and negotiation. Analysts caution that significant challenges must be addressed before oil shipments through the Strait of Hormuz can return to normal levels. These obstacles include the removal of mines from the waterway, repairs to infrastructure damaged by recent drone and missile strikes, and delays in reactivating oil fields that have been shut in.
On the commercial front, a Marshall Islands-flagged crude oil tanker, Nissos Keros, carrying approximately 270,000 metric tons of crude oil destined for India, reportedly transited the Strait of Hormuz safely and is expected to reach its destination soon. This passage signals cautious optimism for the resumption of oil flows through this strategic chokepoint.
Domestic markets are maintaining stability amid these international developments. Refineries continue operating at high capacity with sufficient crude inventories, ensuring stable stocks of petrol and diesel. Additionally, domestic LPG production has been boosted to support consumption needs. Government authorities have instructed states to monitor fuel consumption patterns closely and to intensify enforcement against unauthorized fuel procurement, particularly targeting industrial and commercial users diverting subsidies at retail outlets.